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The gap between public and private sector wages is growing says Policy Exchange

By Tim Montgomerie

The Telegraph leads this morning with a report from Policy Exchange that shows that public sector workers are not only better paid than people in the private sector but that the advantage is getting greater:

  • "The public sector pay premium for a typical worker increased in every region of the UK in 2009 and 2010 (except Yorkshire). As in 2009, the largest premium was found in Wales and then the North West.
  • Public sector workers are paid more than private sector workers whether measured annually, by typical wage or raw average.  For all these measures, the gap between public and private increased between 2009 and 2010.
  • Since the start of the recession, the pay premium for the typical public sector worker has increased by around four percentage points to 24% (or 43% when pensions are taking into account).  When controlling for the differences like age, experience and qualifications, the hourly pay premium for a public sector worker was 8.8% as of December 2010.  This almost doubled from 4.3% two years earlier.
  • Public sector pay premiums rose in every part of the earnings distribution in 2010 apart from at the very top.  Pay shrank (even in cash terms) for the bottom 30% of private sector workers.  The public sector pay gap continued to increase up to December 2010 in spite of an attempt at pay restraint."

Polixy Exchange recommends the end of national pay bargaining so that public sector pay can be set according to local labour market conditions.

It also recommends that the total public sector wage bill is frozen rather than individual wages. At City AM Allister Heath explains the sense of this:

"The pay freeze on individual salaries should be replaced by a freeze in the total pay bill for public sector organisations. This would allow the deficit to be cut, good public sector workers to be paid more – and bad ones who are enjoying an easier, more comfortable life than their hard-pressed private sector counterparts to be paid less or removed. There is nothing wrong with high pay – but only when it is deserved and affordable."

Miliband Ed at TUC march So, now we know. When Ed Miliband marched with the TUC in March and likened the public sector unions' cause to the fight against apartheid, he was defending public sector workers getting better paid by 35% more per hour, on average, than private sector workers.


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